Return Profiles

Hedge fund return profiles show non-Gaussian1 characteristics. As shown in earlier chapters, an analysis of hedge fund-style specific-return indices showed that fund strategies have exhibited non-zero monthly returns and varying degrees of kurtosis, all greater than zero (see Table A.1). A financial model that is able to fit this observed fat-tailed behavior is required.

Table A.1 Monthly Hedge Fund Index Returns Ranked By Kurtosis.

Sources: Greenwich Alternative Investments, EurekaHedge, J.P. Morgan, Dr. Robert Shiller (Yale University)

img

Get Managing Hedge Fund Risk and Financing: Adapting to a New Era now with the O’Reilly learning platform.

O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.